Rick Wagner

The Tri-Cities continues to experience a tight labor market, one that’s too tight and unsustainable in the long term.

That’s good news for employees and would-be employees but not so good for businesses, economic developers and ultimately consumers, a local economist said.

“There is a labor shortage all over the Tri-Cities area,” said Steb Hipple, professor of economics and research associate at East Tennessee State University. “Our labor market has been over-performing for two years.”

Hipple released the Tri-Cities Market Report for the third quarter Wednesday, and in an interview said it was borne out by the proliferation of “help wanted” signs around the region.

“During the summer months, the regional labor market continued to set new records and become much tighter as a result,” wrote Hipple, who works in ETSU’s College of Business and Technology.

“In the third quarter, the metropolitan area employment rose by 2.5 percent to 236,710, a gain of over 5,700 jobs compared to the same period in 2006,” he wrote. “This marks the 10th quarter in a row of employment growth, and the seventh quarter where the increase has topped 2 percent.”

As for unemployment, it fell 14.5 percent to 9,687. The jobless rate for the Tri-Cities metro area during the July to September period was 3.9 percent, compared to 4.7 percent a year ago.

“At the local level, the labor market continues to become tighter and tighter,” Hipple wrote. “This is not sustainable and creates a set of local problems.

“We are seeing record-setting levels of job creation and reduced unemployment rates. This has created a local labor shortage.”

He said employers are unable to hire the number and quality of workers desired, which pushes wages and prices up, and economic developers have difficulty attracting new businesses to the area because of the labor shortage.

Hipple said a key factor in the labor growth is growth in construction employment that accounted for a third of the growth in employment over the past year.

“This is in dramatic contrast to the decline in construction activity at the national level. As it turns out, the local construction boom is focused in non-residential construction, especially in the Kingsport and Bristol areas. As these projects are completed, we can expect construction-related employment to decline,” Hipple wrote. “Fortunately, the bulk of local job growth is in the services industries, and these are ‘permanent’ jobs in contrast to the temporary nature of much of construction employment.”

Job growth was led by construction, followed by government, finance, education and health, leisure and hospitality, retail trade, information services, and transport and utilities.

Job losses occurred in professional and business services, durable manufacturing, nondurable manufacturing, and other services. Employment levels were stable in the wholesale trade and mining sectors.

In contrast, the national labor market eased during the third quarter.

“Employment levels increased for the 20th quarter in a row, but at a slowing rate,” Hipple wrote. “Employment was 146.7 million, for a year-to-year growth rate of 1 percent. Unemployment increased for the first time since the last recession,’ Hipple wrote.

The number of jobless workers was higher by 1.3 percent, reaching a level of 7.2 million. The unemployment rate was 4.7 percent, unchanged from a year ago.

“Employment growth has now aligned itself with the overall growth of the labor force — about 1 percent a year. And as the job expansion rate has declined to a sustainable level, the number of people unemployed has begun to expand as well,” Hipple wrote. “We can expect the level of unemployment to grow at the same rate as the overall labor force.”